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Phil Schiller Cools Down Lower-Cost iPhone Rumors

Rumors of a cheaper iPhone made waves in the blogosphere this week, but Phil Schiller, Apple's Senior Vice President of Marketing, cooled these spirits on Thursday.

Phil Schiller
In an interview with the Shanghai Evening News, Schiller admitted the company isn't developing a cheaper iPhone to increase Apple's market share. He said the iPhone 5 is the best handset for Apple and the company isn't concerned with market share.

“We are not like other companies, launched multiple products in one breath, then pinning his hopes on a product to get the favor of consumers,” said Schiller, according to the translated report. “Competitors launched many dimensions new products, but after purchase will find no suitable software products and user experience.”

Interestingly, though the rumor of a cheaper iPhone was reported by both the Wall Street Journal and Bloomberg, the WSJ was careful to note Apple can scrap the plan anytime. Bloomberg, however, speculated the cheaper iPhone's price, which was estimated to between $99 and $149. Gene Munster, on the other hand, placed the price range between $149 and $199.

Anyway, Schiller was eager to underscore: Apple isn't after market share, it's after creating the best products using the best materials available. At this time, it's aluminum alloy and the in-cell technology used by the iPhone 5.

Targeting the low-end market just isn't in Apple's DNA, he said in the interview. He also highlighted dominating the market doesn't equal retaining profit:

At first, non-smartphones were popular in the Chinese market, now cheap smartphones are more popular and non-smartphones are out. Despite the popularity of cheap smartphones, this will never be the future of Apple’s products. In fact, although Apple’s market share of smartphones is just about 20%, we own the 75% of the profit.

However, this doesn't mean Apple will never go with a cheaper iPhone. Do any of you recall how Steve Jobs replied to the "Apple should make a cheap netbook" argument five years ago? John Gruber of Daring Fireball cites him:

There are some customers, which we chose not to serve. We don’t know how to make a $500 computer that’s not a piece of junk, and our DNA will not let us ship that. But we can continue to deliver greater and greater value to those customers that we choose to serve. And there’s a lot of them. We’ve seen great success by focusing on certain segments of the market and not trying to be everything to everybody. So I think you can expect us to stick with that winning strategy and continue to try to add more and more value to those products in those customer bases we choose to serve.

Five years after his reply, Apple now has a $500 computer that cannibalizes PC sales. It is called the iPad. Even better, Apple now ships tablets for less than $500 and there's the iPad Mini retailing for $329.

In other words, Schiller's words mean Apple will ship a cheaper or a low-cost iPhone, if it can make a good product and profit for the company.

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